The following is a guest post by Rena Conti and Joshua Sharfstein. Rena M. Conti is a health economist and the Associate Research Director of Biopharma & Public Policy for the Boston University Institute for Health System Innovation & Policy. She is also an Associate Professor at the Boston University Questrom School of Business. (Email: firstname.lastname@example.org; Twitter: @contirena1 @BU_ihsip @bu_hsm.) Joshua M. Sharfstein, MD, is Vice Dean for Public Health Practice and Community Engagement at Johns Hopkins Bloomberg School of Public Health. He also holds a faculty appointment in the Department of Health Policy and Management. Previously, he served as the Secretary of the Maryland Department of Health and Mental Hygiene, the Principal Deputy Commissioner of the U.S. Food and Drug Administration, as Commissioner of Health for Baltimore City, and as health policy advisor for Congressman Henry A. Waxman. (Email: email@example.com; Twitter: @drJoshS)
As Americans learn to protect themselves from respiratory infection by coughing into their sleeves and washing their hands well, the federal government and the private sector are investing heavily in the development of safe and effective vaccines and medications targeting the novel coronavirus.
It is not too early to ask the question of how best to make available and fund these products.
One approach is to let the health care system determine price and access. In 2019, new medicines were commonly priced at about $20,000 per course of treatment, with some priced higher. New vaccines are commonly priced at about $200 per course of treatment. While insurers pay the majority of these costs, increasingly Americans are being asked to pay some or even all of the costs out-of-pocket through co-pays. As a consequence, patient access and adherence to treatment suffers.
There are four problems with letting the market determine who gets vaccinated and treated for coronavirus in the midst of an epidemic. First, with no alternatives and many patients desperate for care, we could place our hope in pharmaceutical companies pricing their products responsibly. Yet, there are no tools in place to tame their pricing power available immediately if needed. Second, even with insurance, the out of pocket cost to access these products may be unaffordable for millions of Americans, not to mention for billions of low-income people around the world. Third, limited access will mean that the virus will keep spreading, inhibiting economic and social recovery at home and abroad. Fourth, and most importantly, it’s not ethical or equitable to determine life and death based on ability to pay.
Fortunately, there are smarter ways to proceed. The goals should be expediting access for all who need these products at a reasonable cost.
There are two alternative paths to consider.
One approach is for government to purchase products when they become available for those without health insurance. This is the approach taken for childhood vaccines. However, this would not address access or affordability for those who have some ability to pay in the US and would not address global need for care.
To address this challenge, a related approach is to purchase products when they become available intended for all domestic and global payers. The awarding of ‘prizes’ for the development of new vaccines or therapeutics falls under this approach (see this recent TIE post).
However, a limitation of this approach is that pharmaceutical companies may be reluctant to develop products if they know they will not get paid for their costs if and when the crises subsides. This approach may also not foster innovation in how best to meet the unmet need by awarding the first product to market, not necessarily the best. Both result in delays to getting effective products to the people most in need.
A second approach is an advanced market commitment. Under an advance market commitment, the US government and other payers commit to a minimum price to be paid per person up to a certain number of individuals immunized or treated. The price would be set to cover at a minimum the product’s development and manufacturing costs. For additional purchases, the price would eventually drop to close to their incremental manufacturing costs.
Advanced market commitments can set safety and quality standards for a product to meet. If no suitable product were developed, no payments would be made. However, if a company was successful in making the product and the immediate need for the product subsides they would still be rewarded. With an advanced market commitment, subsequent improvements in the product or additional products to aid the effectiveness of the first can also rewarded by splitting the commitment or adding additional payments.
We believe pursuing a coronavirus advanced market commitment is the most fruitful approach to addressing the current crisis and would set an important precedent for the development of therapeutics to address other unmet medical needs.
To start, policymakers should convene discussions with physicians, public health experts, payers and regulatory agency directors to structure the terms of the advance market commitment under current statutory authority. To help identify best practices, policymakers should include the voices of experts who have already successfully pursued advanced market commitments to prevent or mitigate disease, including the Global Fund for HIV/AIDs and the Gates Foundation. Lastly, innovators engaged in a broad array of approaches to prevent and treat infectious disease and its consequences should be engaged in this process. A coronavirus advanced market commitment should ensure the products targeted are broad enough to address global unmet need, including vaccines, antiviral and antibacterial therapeutics, other products to support the immune function of persons affected and diagnostics to support the effective use of products to prevent and treat infection.